After cracking down on cryptocurrency, govt to launch crypto tokens for transactions

The government, which left no-stone-unturned to stop cryptocurrency trading in India, is planning to launch crypto tokens for financial transactions in the country. It is also considering to replace smart cards with such tokens.

In the public sector, crypto tokens will be initially issued in place of metro cards whereas in private it will be first put in use in issuing loyalty points such as air miles and will be limited to buying the next ticket. It can’t be converted into money.

With the introduction of such crypto tokens, the government may also allow the use of cryptocurrencies in the country in future. According to media reports, a government committee is working on a set of regulations and specific actions in this regard and the draft regulations will be tabled before Parliament after they are legally vetted.

However, the existing ban on cryptocurrencies in India will probably continue.

The government justifies the use of such crypto tokens as does not impact the country’s monetary policy as one will have to pay physical money to buy a token.

The justification, however, seems odd as at this initial stage even cryptocurrencies are bought with physical money via banks.

In April this year, the Reserve Bank of India (RBI) released a statement directing all regulated entities, including banks, e-wallets, and payment gateway providers, to stop dealing with individuals and businesses in decentralised currency.

Meanwhile, the Central government has also been cracking down on cryptocurrencies and has likened it to Ponzi scheme.

The Finance Ministry had earlier said that the virtual currencies (VC) don’t have any intrinsic value and are not backed by any kind of assets. The price of Bitcoin and other VCs, therefore, is entirely a matter of mere speculation.

There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money.

About Author

Tausif Alam has more than seven years of experience in the media industry and has worked in both print and digital spaces. He began his career with Economic Times, where he worked for four years, and then switched to YourStory. Tausif is a straight-talker who believes in ‘seedhi baat, no bakwaas’, and aims to say things without mincing words.